Branding Strategies for Digital Television Channels

In the previous chapters, technical features and economic implications following the digitalisation of the TV signal as well as the development of interactive television were the focus of our analysis. At this point, it is worth considering some managerial implications stemming from the adoption of these new digital technologies. The goal of this section is to determine those managerial areas mainly influenced by the digitalisation process, as well as the way corporate strategies define changes. In this chapter, focus is placed on the analysis of the impact of digitalisation on marketing strategies through an investigation on the growing importance of the brand as a loyalty-based resource, available to digital television networks to aggregate and make loyalty vis-à-vis television viewers more concrete. Special attention is being paid to branding policies adopted by digital television networks through a better knowledge of the reasons why brand equity is important in the television industry.

Conclusions

Interactive multimedia and the so-called information highway, and its exemplar the Internet, are enabling a new economy based on the networking of human intelligence. In the digital frontier of this economy, the players, dynamics, rules, and requirements for survival and success are all changing. The difficulties in sustaining the business models, which have been recently created worldwide, makes this topic extremely relevant in order to understand the sustainability of competitive advantage in the television environment. How will the market for digital interactive television develop? We are going to be consuming more communication, both broadcast and narrowcast, and at least for the immediate future this communication will take digital forms. Costs and prices are falling because of technological progress in processing and transmission, and because of increased supplies of spectrum from the government, not merely for economies of scale in sharing pipelines. Conventional television seems to satisfy a demand for which interactive television is not a very good substitute. Many studies in the economic literature of leisure time use (Robinson & Goeffrey Godbey, 1997) shed light on the demand issue, and they affirm that part of the allure of television is freedom of choice and interactive television may actually be less appealing to people if they must invest more energy and imagination. Managers must not forget that the final player of the iTV value chain is obviously the end user, whose behaviour and preferences are critical factors determining the success of the other players and of the whole industry. Future demand and penetration of interactive TV is expected to grow very fast. Forecasts assert that Europe’s iTV penetration will reach 44% of European households by 2007, up from only 11% in 2002,1 with four countries (UK, France, Spain, and Italy) driving the growth and accounting for 70% of Europe’s iTV households. When considering these projections it is useful to remember the “crossing the chasm”2 paradigm in the technology-adoption lifecycle model. Crossing the chasm is jumping that empty area between the innovators’ segment and the early majority. The early adopters are iTV enthusiasts and are always looking forward to experience technology innovations. Being the first, they are also prepared to bear with the inevitable bugs that accompany any innovation just coming to market. By contrast, the early majority is looking to minimise the discontinuity with the old ways, and they do not want to debug somebody else’s product. By the time they adopt it, they want it to work properly and to integrate appropriately with their existing technology base. Visionary early adopters and the pragmatist early majority have completely different frames of mind about technology; because of these incompatibilities, early adopter surveys don’t help to really understand and to predict accurately how consumer behaviour might change as a response to the introduction of the new technology.

Interactive Digital Television

Interactive television (iTV) can be defined as the result of the process of convergence between television and the new interactive digital technologies (Pagani, 2000). Interactive television is basically domestic television boosted by interactive functions that are usually supplied through a “back channel” and/or a modern terminal. The distinctive feature of interactive television is the possibility that the new digital technologies give the user1 the opportunity to interact with the content that is offered. The evolution towards interactive television has not an exclusively technological, but also a profound impact on the whole economic system of digital broadcasting—from offer types to consumption modes, and from technological and productive structures to business models. This chapter attempts to analyse how the addition of interactivity to television brings fundamental changes to the broadcasting industry. The chapter first defines interactive transmission systems and classifies the different services offered according to the level of interactivity determined by two fundamental factors such as response time and return channel band. After defining the conceptual framework and the technological dimension of the phenomenon, the chapter considers the impact generated by interactive digital technologies on the whole broadcaster economic system. Some dimensions of the economic sub-system of reference are considered such as new types of interactive services offered and new competitive system emerging. The Interactive Digital Television (iDTV) value chain will be discussed to give an understanding of the different business elements involved. The results of the present section allow for an understanding of the impact of interactive television on the whole economic system, together with the significant changes in the market, operator types, and distributive systems. There are many problems that management has to deal with as a result of the changing behaviour of the audience, the status of the viewer, and the nature of the medium and its function. Technological, organisational, and service innovation is undoubtedly the key for understanding the behaviour of firms and institutions in the development of interactive television.

The Economic Implications of Digital Technologies

Having described the technical characteristics of the different digital signal transmission methods, it seems appropriate to investigate the specific characteristics for each medium, underlining both the advantages and limits of each and their notable economic implications. Transition from analog to digital has not only technological effects, but also effects on an economical and cultural level for the television world.

The Digital Metamarket

The world’s emerging multimedia market results from the process of convergence of three industries which were created at an interval of 50 years respectively—the telephone industry (1890), the television industry (1930), and the computer industry (1980). Convergence describes a process change in industry structures that combines markets through technological and economic dimensions to meet merging consumer needs. It occurs either through competitive substitution or through the complementary merging of products and services, or both at once (Dowling, Leichner & Thielman, 1998). Convergence is a phenomenon by which previously separated sectors end up being part and parcel of one big metamarket (Valdani, 1997), thus generating an effective merging of previously different sectors. A terminology specification appears to be right and proper—a specification adopted by the theory of business economics which conceptually defines the meaning of sector, industry, and market based on three dimensions of analysis.1 According to such terminology, the sector is characterised by all the customers’ groups (first dimension), by all the required functions (second dimension), based on the same technology (third dimension). On the other hand, within the confines of such taxonomy, the concept of industry expresses the vertical relations among the sectors. Industry detects the globality of vertically linked sectors, starting from the production of raw materials up to the gleaning of products destined to intermediate or final consumption. Changes in the relations and among the confines of the different sectors are of the utmost importance in changing both the industry and the market structure. Thus, based on the assumption that the definition of “sector” has to do with the uniformities evidenced on the offer side, the definition of industry relates to the process of productive verticalization, the definition of “metamarket” or complex market, widens the business’s competitive area to include those products deemed as surrogate in terms of technology within those usage situations where similar functions and benefits are required.

Digital Rights Management

Digital Rights Management poses one of the greatest challenges for multimedia content providers and interactive media companies in the digital age in order to be able to monetorize their interactive products and services catalogs. In a digital environment, digital contents (video, audio) can be distributed across different media (TV, radio, Internet). Organizations need to take into account some legal issues: • control of copyright and rights management; • regulation of content; • regulation of access; • customer data and consumer protection. There are many problems about conflict between the territorial allocation of broadcast rights and the physical coverage of the signal. As illustrated in the previous chapters, satellite transmission has a much greater potential problem with audiovisual piracy than either terrestrial or cable due to the wide footprint of satellite broadcasts. In respect to out-of-area reception, cable networks offer the most controlled signal distribution since they comprise a closed environment. For terrestrial broadcasting the most typical issue is “overspill,” when the same signals can be received in an adjoining territory. In highly cabled territories, the custom has developed of redistributing the overspill signal as widely as possible.1 In these cases collecting societies will administer the copyright payments. The Net poses challenges both for owners, creators, sellers, and for users of Intellectual Property, as it allows for essentially cost-less copying of content. Digital files can be easily copied and transmitted, and today we already see serious breaches of copyright law. In an analog workflow DRM focused on security and encryption as a means of solving the issue of unauthorized copying, that is, lock the content and limit its distribution to only those who pay. This was the first generation of DRM, and it represented a substantial narrowing of the real and broader capabilities of DRM. The second-generation of DRM covers the description, identification, trading, protection, monitoring, and tracking of all forms of rights uses over both tangible and intangible assets, including management of rights holders’ relationships2 (Iannella, 2002). It is important to note that DRM technologies enable secure management of digital processes and information. Digital Rights Management refers to the management of all rights, not only the rights applicable to permissions over digital content. After giving a definition of Intellectual Property and Digital Rights Management, this chapter discusses the functional architecture domains which cover the high-level modules or components of the DRM system that together provide an end-to-end management of rights. Then the chapter provides a description of the typical Digital Rights Management value chain in terms of activities and players involved along the different phases examined. The purpose of the chapter is to try to understand the impact of the adoption of Digital Rights Management on the Value Chain and to try to analyse the processes in the context of the business model. The chapter concludes with a discussion of the main benefits generated by the integration of Digital Rights Management and proposes the most interesting directions for future research.

The Critical Role of Content Media Management

The advent of digitalisation is providing big opportunities which are changing the shape of the broadcasting industry. New business models and revenue opportunities based on digital capabilities are emerging. Digital technology provides digital media companies with the opportunity to: • provide new products and cross-media experiences aimed at individual consumers and like-minded groups; • provide premium services that give viewers access to greater and more personalized content; • change the television advertising model from mass media to targeted advertising (market and advertise on one-to-one basis direct to consumer); • expand from a traditional push model to a pull-model for product distribution.

New Digital Media and Devices

As discussed in the previous chapter, the technological innovation process has a pervasive influence on the whole digital metamarket featured by the gradual convergence of three traditionally distinct sectors: IT, telecommunications, and media (Sculley, 1990; Bradley, Hausman & Nolan, 1993; Collins, Bane & Bradley, 1997; Yoffie, 1997; Valdani, 1997, 2000; Ancarani, 1999; Pagani 2000). The numerous innovations that could lead to “convergence” between TV and online services occur in various dimensions (Figure 2.1). The technology dimension refers to the diffusion of technological innovations into various industries. The growing integration of functions into formerly separate products or services, or the emergence of hybrid products with new functions, is enabled primarily through digitalisation and data compression. Customers and media companies are confronted with technology-driven innovations in the area of transport media as well as new devices. Typical characteristics of these technologies are digital storage and transmission of content from a technical perspective and a higher degree of interactivity from the user’s perspective (Schreiber, 1997). The needs dimension refers to the functional basis of convergence: functions fulfill needs of customers which can also merge and develop from different areas. This depends on the customers’ willingness to accept new forms of need fulfillment or new products to fulfill old needs. When effective buying power creates a significant market demand for integrated functions, then boundaries are likely to be dissolved between different consumer groups (Grant & Shamp, 1997). The industry and firm dimension refers to relevant industry variables that affect convergence.1 Market barriers to convergence include industry cultures and traditions, regulation and antitrust-legislation prohibiting the creation of alliances, mergers & acquisitions. Deregulation often leads to a removal of artificial barriers that then promotes industry convergence. Firm-specific barriers to convergence include differences in company cultures and core competencies. Different activities along or across traditionally separated value chains may be merged by “management creativity” (Yoffie, 1997) such as the creation of new businesses, acquisition, or the creation of strategic alliances and networks. Convergence describes a process change in industry structures that combines markets through technological and economic dimensions to meet merging consumer needs. It occurs either through competitive substitution or through the complementary merging of products or services, or both at once (Greenstein & Khanna, 1997). The problem is that the notion of “convergence” itself is generally taken to be a characteristic of digital media, suggesting a possible future in which there might just be one type of content distributed across one kind of network to one type of device. Convergence remains ill defined particularly in terms of what it might mean for businesses wishing to develop a new media strategy. This chapter argues for a definition of convergence based on penetration of digital platforms and the potential for cross-platform Customer Relationship Management (CRM) strategies, before going on to develop a convergence index according to which different territories can be compared. The model herewith discussed specifically refers to the European competition environment.

Digital Television

With the introduction of digital technology in the production, distribution, and reception of the TV signals, an actual technological discontinuity occurred which—starting from the first half of the ’90s—has been putting pressure on the TV system thus originating an important transformation. The passage to digital TV is a technological phenomenon of the widest range from the standpoint of transmission capability, of efficiency of distribution networks, of image quality, and of flexibility and variety of performances which for the very first time widen the TV set’s field of use well beyond the programs’ traditional fruition. But this evolution’s value is not only technological. Indeed, it has a profound impact on the entire TV system: from the offer typologies to the consumption manners, from the technological and productive structures to business models. The market outlook, the operators’ typologies, the distribution systems are changing. The audience behavior and the TV watcher’s status are changing, as well as the nature of the medium and its function. In the previous section we described the evolution directives featured in the reference scenario. We will now analyse digital TV’s technological features with special reference to the advantages and limitations of the different manners of transmitting the digital signal.